All that is true but lantency will effect umm "latency lag" as vs. "texture lag". If you go to darlen or some place with tons of textures and spin in place the stuttering will be texture lag.

But if characters continue to run to a spot then warp back to another spot thats latencey lag. Your computer is not getting positioning updates from the sever fast enough so characters tend to "over run" their current position. Or when you press a spell cast and you don't see the effect for 2 seconds that again is latency lag. Or if you see a mob a bit away from you and suddenly it warps to you that is also latency lag.